Strictly Containing the Growth of Government Expenditure
Operating Expenditure
230. We will step up efforts to contain government operating expenditure. I have instructed all bureaux and departments to further review their resource allocation and work priorities, and provide public services in a more cost‑effective manner through consolidating internal resources, streamlining procedures and leveraging technology.
231. On the premise of maintaining efficient public services, we will implement the following measures:
| (a) | stepping up the Productivity Enhancement Programme. On the premise that CSSA, Social Security Allowance and statutory expenditure will not be affected, the rate of reduction of recurrent government expenditure will be increased from the original one per cent to two per cent in 2025‑26. This arrangement will be extended for two more years to 2027‑28. Taking into account the one per cent cut in 2024-25, the cumulative rate of reduction will be seven per cent in total. Using 2023-24 recurrent expenditure as the basis, it will deliver a saving in recurrent government expenditure of around $3.9 billion, $11.7 billion, $19.5 billion and $27.3 billion in the respective financial years; |
| (b) | in view of the reduction in expenditure and enhancement in manpower utilisation, the civil service establishment will be reduced by two per cent each in 2026-27 and 2027-28. By 1 April 2027, about 10 000 posts are expected to be deleted within this term of Government; and |
| (c) | the Government will provide funding of $68.1 billion to the University Grants Committee (UGC)-funded universities in the coming three years. This funding has reflected a two per cent reduction target each year, which is in line with the magnitude of government's recurrent expenditure cut. I must stress that this funding level is still higher than the $63.2 billion in the last triennium. |
232. In last year's Budget, I have requested the relevant bureaux to review the operation of two transport subsidy schemes that incur relatively high expenditure with a rapid growth rate, namely the Government Public Transport Fare Concession Scheme for the Elderly and Eligible Persons with Disabilities (i.e. the $2 Scheme) and the Public Transport Fare Subsidy Scheme (PTFSS). In order to enable the continued operation of the schemes in a financially sustainable manner, we propose the following adjustments after review:
| (a) | the $2 Scheme: On the basis that the targeted beneficiaries remain unchanged, the Government will change the concessionary fare to "$2 flat rate cum 80 per cent discount", which means that beneficiaries will continue to pay $2 for trips with fare below or equal to $10. For trips with fare above $10, the beneficiaries will have to pay the amount of full fare after 80 per cent discount. Furthermore, the number of concessionary trips will also be limited to 240 per month. This fine-tuned proposal preserves our policy intent while striking a balance between enhancing the sustainability of the scheme and minimising the impacts to the beneficiaries; and |
| (b) | PTFSS: From June 2025 onwards, the threshold of monthly public transport expenses incurred for receiving the subsidy under the Scheme will be raised from $400 to $500. The Government will continue to provide a subsidy amounting to one-third of the expenses in excess of $500, and the prevailing subsidy cap at $400 per month will remain unchanged. |
233. The relevant policy bureaux will announce the details later. Upon implementation of the refined arrangements, the Government is expected to save $6.2 billion in the coming five years.
234. To assist bureaux and departments in reducing expenditure and ensure the proper use of public money, I have requested:
| (a) | the Audit Commission to organise workshops for the senior management of Government departments and public bodies. Through sharing experience and case studies on its value for money audits, the Commission seeks to foster the management's understanding and adoption of principles and best practices in fiscal prudence and optimal use of public money; |
| (b) | the Financial Services and the Treasury Bureau to review and enhance the Government's procurement regime. We expect that the new arrangements will be introduced in mid-2025, so as to facilitate departments to procure quality goods and services at a reasonable price through an open and fair framework; and |
| (c) | the relevant bureaux to review the expenditures on social welfare, healthcare and education. The recurrent expenditure on each of these three areas amounts to more than $100 billion in this financial year. The Government should, having regard to demographic changes in Hong Kong, optimise resources and review the sustainability of the use of resources. |
235. In addition, the Government puts forward that for 2025-26, the executive authorities, the legislature, the judiciary and members of the District Councils take a pay freeze. This includes the Chief Executive and politically appointed officials; the Non-official Members of the Executive Council; members of the civil service; the President, all Members and Secretariat of the LegCo; Chief Justice of the Court of Final Appeal, judges of the courts at all levels and other members of the Judiciary; and members of the District Councils.
Capital Works Expenditure
236. Overall construction costs have risen in recent years. The Government will strive to enhance control on cost‑effectiveness when pressing ahead with infrastructure works projects. I have requested the Project Strategy and Governance Office (PSGO) under Development Bureau (DEVB) to support various departments in enhancing governance of public works projects on all fronts. PSGO scrutinises project cost estimates upon inception of a project, and optimises project design in accordance with the principle of "fitness-for-purpose and no frills". PSGO also formulates cost-effective proposals in co-ordination with the relevant policy bureaux and works departments in order to reduce construction costs. Since its establishment, PSGO has reviewed over 540 public works projects, achieving savings in construction costs by over 15 per cent.
237. Meanwhile, PSGO is co‑ordinating the relevant work on reducing construction costs. This includes formulating policies for the procurement of construction materials and products, such as MiC modules and steel reinforcement, through direct procurement by relevant works departments and centralised procurement by a single department. PSGO will also study the use of new materials and innovative construction technologies by drawing reference from the Mainland and overseas practices and experience. All these efforts aim to help departments reduce project costs, enhance cost-effectiveness and ensure timely completion of public works projects.
238. Furthermore, the Government is reviewing the scale and mode of delivery of district cooling systems in new development areas, such as Hung Shui Kiu / Ha Tsuen and San Tin Technopole, to tie in the development of the area with greater cost-effectiveness. The preliminary estimate of savings in terms of works expenditure is at least $40 billion. The Environment and Ecology Bureau will report the review results in the second quarter this year.
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